Reading notes: Launching The Innovation Renaissance: A New Path to Bring Smart Ideas to Market Fast

A few thoughts and comments on Alex Tabarroks' Launching The Innovation Renaissance: A New Path to Bring Smart Ideas to Market Fast.

Overview

Upon a recommendation from @ECONOMISTHULK, I read Alex Tabarrok's Launching The Innovation Renaissance: A New Path to Bring Smart Ideas to Market Fast. I believe it to be a very good book, which usefully complements Tyler Cowen's The Great Stagnation (Reading notes here and there in French) and Erik Brynjolfsson'sRace Against the Machine (reading notes here and there, in French also).

The book starts with more or less off the same base as Cowen's: productivity, the main measure of how technical progress translates into economic activity, has been stagnating for the last twenty years or so in the US. Tabarrok's point is that the choice between stagnation and innovation revolves mainly around three topics: patent (and intellectual property) law, education, and globalization.

The arguments in the book are familiar. Patent law is so broken that it represents an obstacle for innovation. Overly long patent and IP protection provide little incentive to innovation when new ideas or products can be smashed by incumbents or patent trolls. Tabarrok does not propose to scrape it, but to amend it, using variable-duration patents and research prizes, which would restore better incentives. The US education system is as broken as the patent system is, with too few people completing high school and too many going to college (and dropping out). Better paid and more accountable teachers is the proposed solution for the former, more vocational training the way to cure the latter. Finally, the book shows how the rise of China and India can be a boon to the US, since it increases the world stock of ideas and innovators. The US are not reacting well to that opportunity, erecting barriers to the world's best and brightest.

Opinion

I believe that there is little to discuss about the book's core points. They are valid. There are huge gains to reforming IP law, fixing the education system and enabling a better circulation of people and ideas. They are worth repeating and spreading. There is however a small point where I beg to differ. In his chapter "College has been oversold", Tabarrok contrasts the stagnation or decrease of graduates in science with the increase of graduates in the Humanities, arguing that the latter reprensent a lesser potential contribution to innovation than the former. I believe that such thinking is one of the reasons why, despite a steady technological progress, productivity has been stagnating: acceptance of its social consequences has been taken for granted.

Let me take an example: fifteen or twenty years or so, the oldest subway line in Paris was fully revamped. A project was put forward that featured automatic (driverless) trains. It was not implemented, not for cost or technical reasons, but because passengers overwhelmingly said that they would not accept to board such trains. This very same line is now automated, but the delay arguably had a significant cost. I this that this example generalizes. Tabarrok explains how the regulation thicket is hampering innovation in the US. He doesn't question why there is regulation in the first place/ My take is that this regulation is a byproduct of a widespread fear of change. People have by and large seen their works and lives been transformed by technology, not always for the better (a point convincingly made by Brynjolfsson). So they have grown suspicious of innovation. I doubt piling up more innovation is going to alleviate that doubt. This is where psychology and sociology come in: understanding that fear, and providing tools to alleviate it, could be one of the most innovation- and growth-enhancing research agenda.

The role of the humanities is actually wider. Larger labor force participation form women has been a huge boost for growth during the past century. This was not due to any technical innovation, but to social innovation: a new status for women. Are there such opportunities around now? Obviously yes. Tabarrok shows that drugs that would add a few years in life expectancy would generate benefits in the trillions. This is a huge number. I would however be dwarfed by the benefits of just having US people eating less, eating healthier food and working out just a bit more. There is no pill nor clever gizmo for that: you have to understand how and why people make every day small choices that are detrimental to them. The point has been amply made in the case of development studies by Banerjee and Duflo, or by Thaler's and Sunstein's Nudge book.

I also felt that Tabarrok was sometimes restricting his vision of growth to GDP-measurable growth. Cowen showed how much of the contents we now consume are very inadequately (if ever) captured by the GDP metric - this note being an example. However, we consume an increasing quantities of these contents, and this is where the humanities come to fruition.

Again, the main points of the book are valid. We do need more students going into science, and we definitely need more science awareness in the general population. We need a simpler and more reasonable IP regime, and easiers flows of people and ideas. But whereas former technological revolutions were mostly top-down (a capitalist built an electricity-driven factory), this one is bottom-up. Because it is rooted in network effects, you need peoples' full participation. There is no way you will get that without a deep understanding on how they think, make their choices and what their aspirations are. Going from STEM (science, technology, engineering, and mathematics) to STEAM (the same plus arts) may be a condition for the innovation Renaissance. As it was in the historical Renaissance, by the way.